An investor has invested $8,000 in Security X with an expected rate of return of 14%; $10,000 in Security Y with an expected rate of 9%; and $2,000 in a risk free asset with a return of 4%. For the portfolio, her expected rate of return is

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Quizplus · Accepted Answer

The expected rate of return for the portfolio is the weighted average of the expected rates of return for each asset, where the weights are the proportions of the portfolio invested in each asset. In this case, the weights are 8000/20000 = 0.4, 10000/20000 = 0.5, and 2000/20000 = 0.1. So, the expected rate of return for the portfolio is (0.4 * 14%) + (0.5 * 9%) + (0.1 * 4%) = 10.5%.

An Investor Has Invested $8,000 in Security X with an Expected